Public Bill Committee

[Mr James Gray in the Chair]

Clause 1  - National social enterprise strategy

Question proposed, That the clause stand part of the Bill.

James Gray: With this it will be convenient to discuss Government amendments 18 and 21.
I welcome members of the Committee to this stage of the Public Services (Social Enterprise and Social Value) Bill and congratulate the hon. Member for Warwick and Leamington (Chris White) on the Bill being read in Committee and on securing the Government’s support.
Much against my better judgment, the House agreed last week to allow the use of electronic devices in Committee. It was a dreadful decision, but there we are. Of course, members of the Committee may do so, but only if the devices are in silent mode and used with discretion and without disturbing the Committee in any shape, size or form. My preference for dress code in Committee remains the same as it is in the main Chamber, so hon. Gentlemen should keep their coats on. I hope that that is agreeable.

Chris White: It is a pleasure to serve under your chairmanship, Mr Gray, particularly as I am new to the process of private Member’s Bills. I understand from colleagues with far longer service than I have that this is quite a rare occasion and your experience will be gratefully received.
I begin by expressing my gratitude to right hon. and hon. Members and friends for giving me their most valuable resource this morning—their time. I am grateful to the Minister for his support so far and to the shadow Minister for the Labour party’s support for the Bill’s principles. I want to express special appreciation to the right hon. Member for Salford and Eccles for her words of advice and encouragement during the Bill’s early development. Finally, I thank Social Enterprise UK for its assistance throughout that process.
Over the past 11 months since the Bill was discussed on Second Reading, I have been surprised and warmed by the support that the Bill has received throughout civil society. Voluntary organisations, community groups and social enterprises have written to me or contacted my office to express their support for the Bill, which they believe could, through their organisations, make a real difference in communities.
Although the Government have tabled some amendments today, I am pleased that the Bill’s core principle will remain intact and that its main thrust, which will level the playing field for civil society, will not be affected. The amendments will remove the social enterprise strategies from the Bill. That is a condition of the Government’s support. Although I hope that the message sent out by the Bill will be that local authorities should be fully open when consulting social enterprises and keep them in mind when looking at their local economies and public services, I must accept that the strategies might have placed too much of a burden on local authorities when we are asking them to cut costs and focus on front-line services.

Gareth Thomas: Will the hon. Gentleman give way?

Chris White: May I make a little more progress?
Although many believe that the strategies would force local authorities and the national Government to consider social enterprise more thoroughly when planning for the future, the duty to consider consultation—also under the Bill—will give public bodies the incentive to go out and talk to the sector, our charities and voluntary organisations and to work with them on how we can create better procurement systems that benefit our communities.
It is also important to remember that, although the strategies have their place—nothing prevents the Government or local authorities from voluntarily creating their own strategies for social enterprises—the best way in which we can help social enterprise in the public sector is to reform our procurement process. The Bill will achieve a big step forward in that respect. Moreover, I agree that the focus should be on the pre-procurement stage. I believe that that will make the Bill’s impact stronger, by building in social value from the outset of the procurement process, so that we imbed social value throughout the contract process and ensure that, when criteria relating to social value reach the final stage of the procurement process, they are relevant and focus the social impact on those parts of our communities that need it most.
Some of the amendments would strengthen the Bill further. For example, amendment 5 will insert proposed subsections (2A) and (2B) into clause 3 to ensure that, when reviewing “the relevant area” that is to be considered for social value, account is taken of the whole area for which a local authority carries out procurement. Therefore, social value will be given as wide as possible a scope within a commissioning authority, and there will be more opportunities for taking into account during that phase of the procurement process the excellent work that social enterprises, voluntary organisations and community groups perform across our communities.
To reflect the amendments, the title will be changed to the Public Services (Social Value) Bill. I appreciate that change, which not only reflects the essential importance of social value—hon. Members on both sides of the Committee agree that that is the most important part of the Bill—but provides the snappiness that titles of private Members’ Bills sometimes lack.
Although putting any Bill on the statute book is a long process, I have been most pleased by the consensus built around the Bill. In working with colleagues from all political parties and with organisations from across civil society, I have been impressed by how everyone has gone about the business. What matters most is that social value is instilled across public sector procurement to achieve smarter, more socially aware commissioning. The backing of groups such as the National Council for Voluntary Organisations, the Association of Chief Executives of Voluntary Organisations, the National Association for Voluntary and Community Action, Social Enterprise UK and many others shows how much support the Bill has.
I hope that, together, we will see the Bill become law, which will be an important win for social enterprises, charities and voluntary organisations throughout the country and for smarter public sector commissioning, which will benefit all our communities. I therefore ask the Committee to support the Government’s amendments, to move the Bill another step forward, and I again thank right hon. and hon. Members for their time. The Bill will change how we do things for the better, across the country, by opening up public services to those organisations with the knowledge, skill and dedication to help our communities, which is what it set out to do.

Hazel Blears: I am delighted to serve under your chairmanship in Committee on this Private Member’s Bill, Mr Gray.
In relation to clauses 1 and 2, on Second Reading, I referred to the Bill as relatively small but with a big idea and as having the potential to transform procurement in this country—I think that I called it small and perfectly formed. I am genuinely disappointed that the Bill, which was small, is now much smaller in both intent and in effect.
I welcome discussion with the Minister and with the hon. Member for Warwick and Leamington, because I thought the title was important, not so much in relation to strategies as to the definition of social enterprise in the Bill. Clauses 1 and 2 give a good definition of social enterprise. Clause 1(5)(b) provides that a social enterprise has to be a business that is
“carried on primarily for a purpose that promotes or improves the social or environmental well-being”,
and, importantly for me, paragraph (c) provides that
“the greater part of any profits for distribution is applied for”
a social and community benefit purpose.
I have pressed several Ministers, whether the Health Secretary or other Secretaries of State, for a definition of what they mean by social enterprise. We have heard a lot of rhetoric about mutualisation, about transforming social enterprise and about putting it at the forefront of our delivery mechanisms. However, time and again when I have pressed for a definition, it is like my squeezing a sponge that slips away from me, because no one appears willing to say that a social enterprise is one that is carried on for profit, most of which has to be applied for a public purpose. No one is willing to say that there should be an asset lock on social enterprises leaving the public sector to protect the taxpayer’s assets that have been built up over many years, so that they are not simply transferred to the private sector.
We had some debate about that on Second Reading, and I had hoped that the Bill would provide, in legislation, an opportunity to define a social enterprise. We might still have had arguments about that definition, because people have different views, but at least there would have been something on the statute book. I am increasingly worried that the idea of social enterprise covers a multitude of sins and is a very woolly concept. People have come along to various events thinking that commissioning will be transformed and therefore that there have to be social enterprises to get the contracts. All kinds of private organisations are dressing up and putting on the label of social enterprise. Perhaps they put 5% of their profits back into the community, but 95% of their profits are basically private sector.
I have no problem with people being in a private sector enterprise—fine, be a business—but people should be honest about it and not try to squeeze one form of corporate activity into what they think is a flavour-of-the-month political position to take advantage of a commissioning framework. If the commissioning framework proposed under Government amendments is to be effective in addressing what I know are the hon. Gentleman’s deep, deep concerns, we must be far more honest and rigorous in defining the type of organisations that we want to go forward.
I have a second concern about deleting clauses 1 and 2. There is a very good provision for local authorities not only to consult social enterprises in drawing up a national strategy but to consult the public. Again, we have amendments that would allow local authorities to consult the public, but if something is urgent and they are not able to do so, they would not have to do so. A key part of transforming local communities means asking what the public want, not just the businesses that will provide the services. It needs a sense of community governance of the different forms of organisation. That is where we get the real community benefit.
The Minister understands that where we involve the users of the service, the citizens who pay for it and the staff who provide it to get that whole total approach, we get far more social value out of such investment. I am worried that we are moving to a simply transactional process: the local authority purchases a service, which happens to take place after having an analysis of social value. That is a very small incremental step, given where we want to be. This is a missed opportunity to do the transformation that was talked about on Second Reading. I know the practical pressures that are on the Minister and I know that the hon. Member for Warwick and Leamington is committed, but I believe that he would want a more transformational Bill.
If we simply end up with another form of transaction—buying the service that does a little bit of calculation about the social return on the investment—that does not involve the public, the users and the people who provide the services, we will not maximise the impact that we make from our investment. Money is tight across the public service. The way to multiply social value out of investment is by ensuring that all partners are involved.
I am disappointed that the Bill will be smaller. I will support it because it is an incremental step along the way, but I think that it has been somewhat eviscerated, given the ideas that the hon. Gentleman originally proposed. That is not a criticism of him. I know the practicalities of getting the Government to support any private Member’s Bill and I think he has done a heroic job in getting this far, but I would very much like clauses 1 and 2 to remain. I am not wedded to bureaucratic strategies, but I support the idea of a definition of social enterprise that involves all the partners, including the public, in deciding the type of services that we want to provide.
I have concerns about some of the amendments on the process as well, but on the principle of clauses 1 and 2, I want to say for the record that I am disappointed that we have not been able to keep them in the Bill. Perhaps we will have another private Member’s Bill at some point in the future to bring back some of those items of substance, and the hon. Gentleman would have my full support in doing so.

Gareth Thomas: It is a pleasure to serve under your chairmanship, Mr Gray. It is a particular pleasure to follow my right hon. Friend the Member for Salford and Eccles, who was a great propagandist for social enterprises when she was a Secretary of State. She continues to be an expert in this field. It is also a pleasure to have the opportunity to praise the hon. Member for Warwick and Leamington for introducing the Bill and establishing a coalition of support.
Despite the inevitable intimidation and bullying to which Back Benchers are subjected by ministerial colleagues when introducing a private Member’s Bill, the hon. Member for Warwick and Leamington has nevertheless managed to defend an important part of the Bill. I genuinely congratulate him on the work he has done, particularly on clause 3, the fundamentals of which have been protected despite the amendments tabled by the Minister, which I understand to be relatively technical. The Bill is a worthy and important step forward from which the social enterprise movement will undoubtedly benefit.
It is a privilege to shadow my neighbour, the hon. Member for Ruislip, Northwood and Pinner. I have always had a profound sense of sympathy for his being able to see the best constituency in Britain without being able to represent it, which must be terribly tough.
Back in the mists of time, on 20 January 1999, I had the good fortune to initiate an Adjournment debate in the House on social enterprises, so I feel that I have returned to my past by having the privilege of taking part in this debate. In the Adjournment debate back in ‘99 I urged the then Government to introduce an overarching strategy that would tackle the lack of recognition and effective support for social enterprises—my right hon. Friend touched on that—and the inability of too many social entrepreneurs and social enterprises to access finance. We have come a long way since that Adjournment debate, not least thanks to the considerable work of many members of the previous Government, including my right hon. Friend.
I would be interested to hear the Minister’s reason for trying to persuade the Committee that clause 1 should not stand part of the Bill. I suspect that he remembers his own private Member’s Bill, the Sustainable Communities Act 2007, which also requires local authorities to prepare strategies for making things better. Clauses 1 and 2 of the Bill seek to amend that Act in a relatively small way, and I suspect that, if he were to be honest with the Committee or in private, he has lost an argument with his friends in the Department for Communities and Local Government. The idea that a social enterprise strategy would be a huge burden on Whitehall or on local authorities is a little far-fetched. Deleting clauses 1 and 2 and changing the Bill’s title would gut many of the potentially huge wins that the Bill might deliver, notwithstanding the benefits of clause 3.
The Minister, given the training he has received from many of my former constituents in Pinner and Hatch End, will no doubt merit promotion at some stage, and the Minister who comes after him may not have his apparent commitment to promoting social enterprises or his apparent clout in Whitehall—I take that at face value because I have not had the chance to study his record in office. In the absence of a Minister with such enthusiasm, who will encourage the Government to come together to ensure that cross-Whitehall commitment to addressing the problems faced by social enterprises is maintained beyond these first months of the coalition Government?
The Committee will be aware of the problems many social enterprises have had with the Work programme and the problems of Central Surrey Health, a social enterprise set up to win contracts from the NHS, which is a big society award winner that has lost out to a private sector player. The benefit of having a strategy is that it creates political space, a dialogue and a conversation across Whitehall and the sector, allowing them to think through the challenges faced by social enterprises and what can be done to meet those challenges.

Charlie Elphicke: The hon. Gentleman is right that having a strategy creates a discussion, but is not the central point that we should be not only having a conversation, but doing something? Whitehall is littered with strategies and box-ticking, followed by award ceremonies for those who have ticked most boxes. Should we not be writing a duty into contracts and making it happen rather than simply talking about it?

Gareth Thomas: The hon. Gentleman is absolutely right, but we must have the opportunity to discuss what needs to be done and what role Government can play in helping social enterprises to flourish. Had I been given the opportunity, early on, to try and influence the hon. Member for Warwick and Leamington in the drafting of the Bill, I would have wanted the clause to be somewhat tougher. I might have wanted to include a requirement to report to Parliament on the strategy’s progress.
Nevertheless, potentially, the clause creates a vehicle for ensuring that the Government are clearly accountable for their progress in supporting the development of the social enterprise sector. In the clause, the hon. Gentleman would allow the Government to make up their own mind about whether the strategy should be reviewed. Again, I hope we might have encouraged the hon. Gentleman, with hindsight, to require them to do so to see how the strategy is working. They might review it after three years—certainly after five. That is the requirement in other areas of legislation, and it would toughen up the clause. In so doing, it would help to ensure that there remained in other Departments across government—not just the Minister’s—the capacity to think through the issues affecting social enterprise. It would require senior officials in each part of Whitehall always to be thinking about what else they could do to help such social enterprises. Clearly, there are problems with how those in health and in the Department for Work and Pensions understand how to help social enterprises, and with the scale of cuts in funding for local authorities, there are also problems for the Department for Communities and Local Government.
I gently encourage Opposition Members to resist the Minister’s considerable charms and to support the retention of clauses 1 and 2. We will listen with great interest to what the Minister says to justify the deletion of a strategy, but I am minded to encourage Committee members to divide on the amendment.

Richard Fuller: It is a great pleasure to contribute to the debate, Mr Gray, and to follow the distinguished speeches that began it. It is also a great honour to congratulate my hon. Friend the Member for Warwick and Leamington. He is described in the newspapers today as self-deprecating—and he is. He has achieved a tremendous amount with the Bill, so far. It is the desire of Members on both sides of the House that his journey, and ours with him, should continue in promoting the role of social enterprises in the United Kingdom. I also thank the Minister for his efforts in promoting the parts of the Bill that he thinks fit the Government’s overall strategy. That is a tremendous help for all of us who believe that social enterprise’s evolving and emerging role in our economy should be encouraged and nurtured, both in our local communities and nationally.
Good points have been made about clauses 1 and 2 from the Opposition Benches—I say that, but this is pretty much a communal effort. I shall speak briefly about a couple of those points.

James Gray: Order. We are, of course, considering clause 1.

Richard Fuller: Thank you, Mr Gray.
The right hon. Member for Salford and Eccles talked about the definition of social enterprise being important, and she is correct. Looking back, we can see that that definition has been elusive. I remember at business school back in the 1980s being taught by Amitai Etzioni, who was advancing his own view about the definition of social enterprise and its role. That definition has evolved greatly over the 20 or so—maybe even 30—years since. The right hon. Lady mentioned that an asset lock was important, and many of us would agree, although it is not part of the definition in the Bill. She made the good point that that is such an important issue that perhaps it should be in a different Bill. There are many different views on that, and the circumstances are evolving. It would be a shame to hold up the progress that can be made now on the impact of social value and procurement while we debate the greater issue.

Gareth Thomas: The hon. Gentleman has rightly taken up the point that my right hon. Friend the Member for Salford and Eccles made about asset locks. Social enterprises can use a whole series of legal forms that have an asset lock in place. Might not a discussion about the strategy to support social enterprises at a national level allow the debate about asset lock requirements to flourish? I encourage the hon. Gentleman in particular to resist the blandishments of the Minister and to support clause 1 stand part of the Bill.

Richard Fuller: I appreciate that. I do not need much encouragement to go against the blandishments of the Minister, but I do not agree with the hon. Gentleman. The Bill provides an opportunity to continue to paint a future together for social enterprise, and it would be sad if he moved forward with this amendment. It is useful as a probing amendment, but I urge him not to press it to a vote. I will definitely support the Government on this matter, because, as my hon. Friend the Member for Dover has mentioned, people would like the parts of the Bill that impact procurement now to move forward now. The Minister has shown that that is his intent, and they are the most practical parts of the Bill. The comments that the hon. Member for Harrow West has made about discussion are perfectly valid, and we should discuss the matter, but that does not have to be done within the context of the Bill.

Gareth Thomas: To be clear, I seek to defend the integrity of the Bill. It is the Minister who wishes to move an amendment to delete clause 1.

Richard Fuller: I appreciate the hon. Gentleman’s clarification of his point. Nevertheless, this Bill is important because it is another step in a journey, and many in the social enterprise world see it as a valuable step forward. We should move forward with the Bill, and we should also move forward separately with trying to help the Government in their broader understanding of the role of social enterprises in our community.
There is a risk that the role of social value and social enterprises is seen as something that we should consider after we have completed the process of deficit reduction. That view suggests that we have to tackle deficit reduction before we look at social value, which I do not think is right. I think—I am sure that the Minister shares this view—that social enterprise is part of the solution to getting our public finances back into shape. We want to encourage the diversity of organisations in our community, quite rightly, as the right hon. Member for Salford and Eccles mentioned, including the participation of the public and the broader community of other non-profits and charities in that dialogue, to help local authorities and national Government to achieve the goal of getting our public finances back in order.

Hazel Blears: I am listening carefully to the hon. Gentleman’s comments. On Second Reading we discussed family intervention projects, which I feel are the best example of where we can save money and have a transformational effect on people’s lives. Much of that work is best carried out by social enterprises together with other community groups. The Government have now adopted the previous Government’s proposal on family intervention projects; I think that the Secretary of State for Communities and Local Government is talking about the top 100,000 families, which is absolutely where we ought to be. That is to some extent why I support my hon. Friend the Member for Harrow West on the need for a strategy. As I said, I am not wedded to strategies simply to have them lie about Whitehall and tick boxes. If one wants integrated service provision, it is essential to get all the Departments lined up, facing in the same direction and coming together for that purpose. The hon. Gentleman made that point very well.

Richard Fuller: I appreciate the right hon. Lady’s comments. Strategy could happen in two ways. I agree with her that we do not want to see another report on the shelf. However, we are at a period in our history, with the circumstances of our public finances and the evolution of different forms of social and corporate enterprise, where strategy will emerge from action, rather than being dictated or viewed from the top. We have the opportunity by passing the Bill to learn an enormous amount to help us with the definition of the two parts. That is why it is so important that we move forward with the Bill and that we encourage—through our words, deeds and legislation—all the things that will help us to create the knowledge that in two or three years’ time will enable us to have a much deeper and richer understanding of the strategy. For that reason, I shall support the Government on the Bill. I congratulate my hon. Friend the Member for Warwick and Leamington on enabling us together to paint a better future for our country.

Lorely Burt: I had not intended to speak. When I read the Bill, I was hugely impressed and I congratulate my hon. Friend the Member for Warwick and Leamington. When I saw the Government amendments, I felt that the Bill had had the heart ripped out of it, if I am honest. I was particularly taken with the comments of the right hon. Member for Salford and Eccles. The last thing that I want to do is scupper my hon. Friend’s valiant efforts, so I am minded to support the Bill.
I have worked extensively in procurement policy, particularly procurement from small business and women-owned businesses. I have looked at the feasibility of using Government procurement power to achieve good, social aims. I agree with the right hon. Lady that procurement is not a huge thing to ask of local authorities and Government, because they deal with a lot of administration.
I hope to hear from the Minister whether it would be possible to move forward incrementally, particularly in the definition of social enterprise, as mentioned by the right hon. Lady. Perhaps something like that could be built into the Bill in a Government amendment on Third Reading. That would take the ideals and the practicality of ensuring that the Bill is effective and achieves its aims as far as possible.

Steven Baker: I congratulate my hon. Friend the Member for Warwick and Leamington on promoting the Bill. I stand by the remarks that I made on Second Reading. In contrast to some of my colleagues, I am delighted that the Government plan to remove clause 1. I am sure that we all wish to live in a society where the ties of voluntary association that bind us together and cause us to strengthen bonds of fellow-feeling are increased. We all value that richness of relationships, which is the basis of human flourishing. I can think of nothing more likely to trample and destroy those bonds of voluntary association than a national or, indeed, local strategy to make it so.
I welcome the Government’s turning down of clauses 1 and 2. I recognise the need to be clear about what a social enterprise is; that is a conversation we could certainly have. Perhaps we know one when we see it—mutuality, friendly societies, co-operatives and people coming together voluntarily to serve one another—and, of course, I am all in favour of that. Local and national strategies may be more prejudicial to success than helpful, so I am delighted to support the Government’s stand against clauses 1 and 2.

Nick Hurd: It is a genuine pleasure to serve for the first time under your chairmanship, Mr Gray, and out of respect for you, my BlackBerry will stay firmly in my pocket. I apologise to you and the Committee for being a little under par this morning—I am suffering from receding man flu—but it is a genuine pleasure to speak to the amendments.
It would be churlish not to welcome the shadow Minister for Civil Society, and my Harrow neighbour, the hon. Member for Harrow West to his new role. He has accused me of intimidation and bullying, and he surprised me by suggesting that I have clout across Whitehall. That is news to me, and to many of my colleagues. However, it is good to see the hon. Gentleman in his place.
I pay a sincere tribute to my hon. Friend the Member for Warwick and Leamington, both personally and on behalf of the Government, not just for his choice of Bill but the skill with which he has built a coalition of the willing and his patience throughout a frustrating process. I speak from experience, having shepherded the Sustainable Communities Act 2007 through Parliament, which was a tortuous process. I was helped not least by the then Labour Secretary of State, the right hon. Member for Salford and Eccles, who was extremely helpful. I heartily congratulate my hon. Friend on what he has achieved so far.
Building a coalition around the Bill is no small feat, and it is worth stepping back and focusing on what we agree on, because it is another milestone or stepping stone on quite a long journey. I am prepared to pay full tribute to the previous Administration for their sincere efforts to support social enterprises, led by the right hon. Lady. I think that we all agree on the need to try to encourage more intelligent commissioning.
Most of the people charged with spending hundreds of millions of pounds of taxpayers’ money are doing an incredibly difficult job at this time, and we must support them in doing that job as intelligently as possible. In the current circumstances, when there is much less money around, that means trying to extract as much value from every pound of taxpayers’ money as possible. There is a debate about what value means in that process, and there is a lot of agreement in the Committee that value should extend just beyond the lowest price. We want those who buy on behalf of taxpayers to have the freedom to think with a little more latitude about wider social, environmental and economic value in the long term. Most of us who have become engaged with the issue know the difficulty and the challenge of trying to break through. It is a cultural challenge as much as anything, when managing risk in the public sector.
The Bill is an important stepping stone in the process; it is not the end of the journey, but it moves things along the road to more intelligent commissioning. It encourages innovation, leadership and perhaps some risk, because the risk attached to the status quo is so high. The cost of the status quo, which is that we are failing to deliver value on, is high and consistently underestimated by the system. There is cross-party agreement—it was good to hear the shadow Minister articulate it—on the need to try to make it easier for social enterprises and not-for-profit organisations to participate in public service and to play a bigger role in challenging the status quo.
The Bill goes with the grain of that, and certainly with the grain of what the Government are trying to achieve through public service reform, not least—this was not mentioned in speeches—the new best-value duty that my right hon. Friend the Secretary of State for Communities and Local Government has placed on local authorities to consider value, including social value, in all contracts throughout the process and a recurrence of extensive consultation with end-users.
The Bill goes with the grain of what the Government want to support and what previous Governments have wanted to support, so its principle is welcome, but the right hon. Member for Salford and Eccles and the shadow Minister, who also served as a Minister, both know better than I do that, in government, one has to strike balances. In this situation, we need to strike a balance between the imposition of new duties and our desire to streamline, speed up and make processes more efficient, because there are lots of complaints from social enterprises and charities about how slow the process can be.
As legislators, we all have a responsibility, when considering proposals and new legislation, first, to ask whether a new law is needed and, secondly, to ensure that that law is focused on what will make an impact and a difference. That brings me to our first set of amendments to clause 1. We believe that clauses 1 and 2 should be deleted. The logic flows across both clauses, so, with your permission, Mr Gray, I will speak to clause 2 as well as clause 1.

James Gray: We will debate clause 2 shortly, so it is better to keep it separate.

Nick Hurd: Okay. Thank you for your guidance, Mr Gray.
I made it clear on Second Reading that we supported the Bill in principle. I said that we would be extremely happy to consider it in Committee, but that we would make amendments. I was explicit at that time in saying that we wanted to remove clauses 1 and 2, because we believe that it is not necessary to legislate in this context. That comes back to a fundamental point that has been touched on by various people: I am all for strategies, but they have to be driven by need and conviction.

Gareth Thomas: Will the Minister give way?

Nick Hurd: I will just finish my point.
Where legislation becomes a bureaucratic box-ticking exercise, it loses tremendous value. I remember being aghast in my first Parliament about the amount of documents and papers that came thudding through the mail box into the office and then sat on shelves. There were strategy documents covering all manner of things. I increasingly questioned whether they would make any difference to anyone. Precisely because I want local authority leaders and commissioners to embrace social enterprises and take forward this agenda with conviction, I do not want this to involve a sense of duty to comply with a bureaucratic exercise. We have mentioned sustainable communities and sustainable community strategies. Too often, glossy brochures are produced because they have to be and not enough conviction and thought are put into them.
As I have said, there is an explicit coalition Government commitment to encourage and support social enterprise mutuals to make it easier for them to participate in public service. Before I give way to the shadow Minister, I will say that there is an enormous amount of activity going on to support social enterprise, but there is a fundamental point about whether we need to legislate to require central Government and local authorities to produce social enterprise strategies. I fear that we would lose something in that process. We want to persuade people. We want to see real leadership. If this just becomes a bureaucratic function that everyone has to do, there is a danger that we will be working against ourselves.

Gareth Thomas: I understand the Minister’s argument, even though I am not thus far convinced by it. He said that a whole series of things are being done to help social enterprises. Is there a strategy to promote social enterprises?

Nick Hurd: Yes, there is, and it flows from an explicit coalition Government commitment to support social enterprise mutuals and to make it easier for them to participate in public service delivery. Since the debate on Second Reading, we have published, as promised, a social investment strategy that addresses access to capital, which, as he and the right hon. Member for Salford and Eccles know, has for some time been rightly expressed as one of the great brakes on the expansion of social enterprises. My hon. Friend the Member for Bedford knows that issue well, too. The first strategy document published was entirely focused on our mission to grow—
 Mr Thomas  rose—

Nick Hurd: Let me finish my answer to the hon. Gentleman’s first intervention. The document was entirely focused on what we are doing to try to grow the social investment market. It is a small, fledgling, embryonic but real market, and we are extremely excited about its potential, because if we can achieve our aim—the strategy sets out a number of avenues of activity, not least the creation of Big Society Capital—we will make it easier for social entrepreneurs to access capital. Over many years, such people have told us consistently that difficulties relating to that are the biggest barrier to growth.

Gareth Thomas: Access to finance is clearly an element that one would hope to see in a strategy on social enterprise, but surely it is not the only factor. I look forward to the Minister setting out the strategy’s other elements, but at what point does he think that Parliament will have the opportunity to review the success of the Government’s strategy on social enterprises?

Nick Hurd: The hon. Gentleman is entirely right that other elements are involved, not least the opening up of new markets for social enterprises, which was discussed a lot in the social investment strategy and is at the heart of the public service reform White Paper, too.
We are trying to create new market opportunities for social enterprises and to make it easier for them to access capital in addition to the Big Society Capital project, which is working towards creating a new institution with £600 million of capital. That is a serious play in this area. We have also announced that we will set aside at least £10 million for a technical assistance fund to help social enterprises become more investment-ready, so that they can go to Big Society Capital through intermediaries and try to access the money.
Additionally, we are working closely with Ministers at the Department for Business, Innovation and Skills to ensure that we are fully joined up on the work that they are doing and the opportunities that they present to social enterprises, which, in my view, can play an incredibly important role in the growth agenda, or the economic priority to create jobs. The regional growth fund is relevant here, as are the plans to develop a network of 40,000 mentors to support small businesses, including social firms.
The Government are joined up. A huge amount of activity is going on to support social enterprises and other entrepreneurs. That is being communicated to stakeholders, and I continue to discuss with Ministers whether there are merits in joining that up in a formal strategy document. I will come back to my earlier point: the previous Administration were guilty of believing that just publishing a strategy document was enough and that suddenly doing so would be transformative. In my view, it is not. There are occasions when a strategy document is useful—we certainly felt that it was in relation to our plans to grow the social investment market—but we do not think that it is necessary to legislate for one.

Hazel Blears: A significant amount of public money is now being used to commission services in the social enterprise sector, but does the Minister think it important that we have a proper, agreed definition of a social enterprise? Some Ministers have told me that it is anything not in the public sector, and I am increasingly worried that the integrity of the social enterprise sector is being worn down because organisations that are clearly not social enterprises are parading as them. Will the Minister tell us where we can get a legally agreed definition of social enterprise?

Nick Hurd: Legally agreed is one matter—a definition is included in the Bill, and it is one that I am perfectly comfortable with. However, in terms of where legal definitions may emerge and the need for them, one has not perhaps been required up to now, although that may change. I refer the right hon. Lady to regulations relating to the Localism Bill, particularly the right to challenge and the right to buy, about which the definition of legal form and agenda has been an issue, and she has spoken consistently and quite rightly about the need for protection with regard to asset locks. That is the forum for such a discussion on definition through regulation. We are also about to embark on a review of charity law, and I suspect that to be part of the debate, too.
The right hon. Lady’s fundamental point is right. As hon. Members will be aware there is a spectrum, from pure charitable activity to social businesses. Some blurring of lines might not have mattered until now. She may be right that we have reached the point at which some definition in law is needed. As I have indicated, there are two legislative opportunities for that to happen.

Gareth Thomas: I mentioned the problems that social enterprises have had in winning contracts connected to the Work programme. Perhaps the absence of a definition of social enterprise has been one of the factors. What happens when something goes wrong, as in the case of the Work programme, with the informal strategy the Minister alludes to? What are the means of accountability for the Government to put right those problems and—as the hon. Member for Dover said—as a result, to make things happen?

Nick Hurd: The hon. Gentleman talks about accountability and suggests that the lack of a formal strategy is a problem. I have laboured the point that the Government made a formal commitment, for which we will be accountable. He talks about the Work programme, though it is a little early to make definitive judgments about whether things are going wrong. He should know that the Government, including DWP Ministers, have an explicit intent to make it easier for the not-for-profit-and-dividend sector to participate in that programme, precisely because evidence shows that social enterprises and charities prove extremely effective at the tough work of getting people back into work, because they enjoy a different relationship of trust with the people whom they are trying to help.
Around 300 social sector organisations are actively involved in the supply chain. The Minister responsible has said that they stand to gain at least £100 million from that process, depending on results. That is a major opportunity created by the Government for the sector. I know from my contact with Minsters that they are closely monitoring what is happening on the ground and take it very seriously. All that flows from the coalition Government commitment, for which we are prepared to be accountable.
I return to the fundamental point: we need to be clear why we are legislating. The Government do not believe it necessary to legislate to impose a duty on Government and local authorities to publish social enterprise strategies under clause 2. Publication of strategies should be driven by need of the moment and conviction, rather than a bureaucratic duty.

Question put, That the clause stand part of the Bill.

The Committee divided: Ayes 6, Noes 8.

Question accordingly negatived.

Clause 2  - Local authority strategies

Question proposed, That the clause stand part of the Bill.

Gareth Thomas: Again, it would be helpful if the Minister clarified why such a modest proposal to require local authorities to produce a sustainable community strategy cannot be taken on board by the Government. He has tabled a series of amendments to the requirement on local authorities to put together a sustainable community strategy, but in his response to the debate on clause 1, he did not explain what has changed since he introduced his private Member’s Bill, which, in the words of the hon. Member for Wycombe, established a burden on the Government to produce strategies. Why should things be different for this Bill?
In part, the hon. Member for Warwick and Leamington is seeking to address the concern that, although some local authorities have a positive attitude and a real enthusiasm for promoting social enterprises, in practice, without a legislative requirement to consider the implications of supporting social enterprises, other local authorities would not have such an attitude and enthusiasm.
I want to take the opportunity to praise the contribution of a series of Co-op councils and Labour administrations committed to a co-operative and social enterprise vision for seeking to champion and promote social enterprise development in their areas. The requirement proposed by the Bill would help to strengthen the arm of such Labour and Co-op councils and encourage other local authorities to step up their efforts to emulate that work.

Nick Hurd: The essence of my argument on clause 2 is the same as my argument on clause 1. Although the goal is desirable, we see no need to legislate. We want as many local authorities as possible to seize the opportunity to engage with social enterprises as part of the solution to some of the problems and challenges that we all face in the current resource-restrained environment. As the hon. Gentleman has said, a number of councils get that and are doing it well.
The challenge—this is our preferred route—is to identify best practice and inspirational leadership, to build the evidence on how an innovative approach to working with social enterprises delivers better results for service users and the taxpayer and to spread that through the system, rather than deluding ourselves that imposing a new duty on local authorities will be transformative. We are looking for inspirational leadership and genuinely to persuade people of a course of action. From direct experience, I do not think that it helps simply to prepare another glossy strategy document that will sit on a shelf. Such a document may be something of a cop-out, and we can do better than that.
The hon. Gentleman cites the Sustainable Communities Act 2007, of which I am extremely proud, but he is wrong about what it seeks to achieve. Its premise is that local people know best and should have more opportunities to present their ideas about things that should change in their areas. It places a greater requirement on central Government to change their attitude and to create space for such ideas to be heard. We started that process, which has effectively resulted in the bureaucracy-busting service at the Department for Communities and Local Government. Several hundred communities have taken advantage of that service. The only requirement imposed on local authorities that decide to take part—there is no obligation for them to do so—is that when proposing an idea for consideration by the Department, they should show that they have effectively consulted their communities and that the idea is representative.
During the passage of the 2007 Act, we struck the right balance between placing requirements on central Government and establishing local freedom and power. I do not think there are any points of comparison. The central point is whether we need to legislate to impose a duty on local authorities to publish social enterprise strategies, and we do not believe that a case has been made for that. We would much prefer to work with the leaders and the people who are showing best practice to inspire the rest of the network to understand that social enterprises can be an incredibly important part of the solution.

Question put and negatived.

Clause 2 disagreed to.

Clause 3  - Contracts of contracting authorities

Nick Hurd: I beg to move amendment 3, in clause3,page2, line31,leave out subsection (1) and insert—
‘(1) If a relevant authority proposes to procure or make arrangements for procuring the provision of services, or the provision of services together with the purchase or hire of goods or the carrying out of works, by—
(a) entering into a public services contract that is not a contract based on a framework agreement, or
(b) concluding a framework agreement as regards which public services contracts are likely to constitute the greater part by value of the contracts based on the agreement,
it must comply with the requirements in subsections (2), (3) and (4) before starting the process of procurement.
(1A) The authority is to be treated for the purposes of subsection (1) as having started the process of procurement as regards what is proposed to be procured as soon as it takes whichever of the following steps is the first to occur—
(a) sending a notice to the Official Journal of the European Union for the purpose of inviting tenders, requests to be selected to tender or to negotiate or requests to participate in relation to a public services contract or framework agreement relating to what is proposed to be procured;
(b) publishing an advertisement seeking offers or expressions of interest in relation to such a contract or framework agreement;
(c) contacting a person in order to seek an offer or expression of interest in relation to such a contract or framework agreement;
(d) contacting a person in order to respond to an unsolicited offer or expression of interest in relation to such a contract or framework agreement;
(e) entering into such a contract or concluding such a framework agreement.’.

James Gray: With this it will be convenient to discuss the following: Government amendments 4 to 17, 19 and 21, Government new clause 1 and Government amendment 22.

Nick Hurd: As the Bill’s sponsor, my hon. Friend the Member for Warwick and Leamington, flagged up, amendment 3 will limit the Bill’s scope to include only public services, thereby removing contracts for goods and contracts for work from its scope. It will also limit its scope to the pre-procurement stage of the commissioning process where—this is the critical point—we believe there is most scope for taking account of those issues. Again, we are trying to focus on where we think it can make most difference. For example, we believe that in a contract for care services for the elderly, consideration of the full social, environmental and economic value through consultation with service users and the market would lead to better specification, which in turn should lead to better value for money through more tailored services. The amendment would also clarify how framework agreements should be treated in relation to the Bill.
By focusing on services, the legislation rightly focuses on the types of contract with the greatest direct impact on individuals and communities, and consequently where wider value is likely to be most relevant. I stress that it is not the Government’s intention to suggest that there would not be benefits in considering wider value in other forms of contract, but we do not believe that they warrant legislation at this time.

Hazel Blears: Again, I believe that this issue significantly dilutes the Bill’s original intention, which is to try to maximise social value. Limiting contracts to services will miss out on the whole range of public contracts covering purchasing goods. All the evidence that we have drawn out is that spending money locally provides seven times the impact of spending it in other areas, so the purchase of goods by public authorities can have a tremendous effect on the local supply chain and local economies. Why is the Minister deliberately removing an opportunity to enhance local economies through purchasing goods?

Nick Hurd: I take the right hon. Lady’s point, and return to the point that I tried to establish at the start of my comments about trying to strike a proper balance between our objective to encourage more commissioners to think about wider values, such as social and environmental values, in their considerations, and our determination to try to streamline the process and to reduce the number of additional duties on commissioners. It is a balancing act, and this is where we have got to in terms of trying to find that balance. We do not believe that we have necessarily done that in the Bill; we are focusing on where we think we can make most impact.

Hazel Blears: May I ask the Minister a specific question? Would his definition cover a local authority’s procurement of the construction of housing? Would that be goods, or a service?

Nick Hurd: That leads me to my next remarks, which are designed to be helpful in relation to definitions, particularly when there is a blend of goods and services. We are not saying there would not be benefits in considering wider value in other forms of contract, and there may not be much standing in the way of commissioners who want to apply that at the moment. But in terms of definition, we propose the following approach if a contract is for services and goods, or for services and works.
If a contract is for both goods and services, it shall be considered to be a public services contract if the value for consideration attributable to those services exceeds that of the goods covered by the contract, otherwise the contract should be considered to be a contract for goods. If a contract is for both works and services, it should be considered to be a public services contract if the works element of the contract is only incidental to its principal object. Otherwise the contract will be treated as a contract for works.

Kate Green: I am concerned that that is simply a recipe for confusion and challenge. I used to run such organisations, so I have a real-life example. We supplied publications—published material—on the social security system. The books were clearly goods, but the information, arguably, was a service. It would have been absolutely impossible for us to disentangle the value of the books and the knowledge when we priced up the contract. Does the Minister not feel that it is a recipe for confusion and difficulty? How does he see that being resolved?

Nick Hurd: I do not necessarily see that. At the end of the day, and underlying this whole legislation, is a large amount of discretion at the local level to apply this, because the legislation imposes a duty on commissioners to consider social and environmental aspects, where they consider it to be relevant and proportionate. The Bill rightly leaves a fair amount of discretion at a local level. We are trying to focus the legislation on where it will make most impact. We think that that will be on public services, rather than goods or contracts. Where there is a blend, I have given some indication of what we think is the right approach, but there will still be a fair amount of discretion at a local level to sort this out.

Hazel Blears: Perhaps I can pursue this matter a little further with the Minister. He is aware of a social enterprise in my constituency, because he has had the pleasure of meeting Aileen McDonald from B4Box. She provides construction services and refurbishments while at the same time employing people who have had a difficult employment history and perhaps have not worked for a long time. In the process of doing her construction work, she provides employment opportunities and services. My concern is that when the Minister says that there is discretion for local authorities, does that mean that they are protected if they choose to go down the social value route, even if they are a provider of goods and services? I am concerned that some authorities will feel exposed.

Nick Hurd: I am extremely grateful to the right hon. Lady for introducing me to Aileen. She is an incredible force. What she is doing is entirely right and it is very impressive how she is executing it. We want to encourage more of what she is doing and proposing. It is intelligent commissioning, which is exactly what we want to support. That she is managing to do it and creating space for herself to do it suggests that there is not necessarily a block to what she is trying to achieve. I stress that we are on a journey. We are proposing through these amendments what is achievable today in striking the right balance. Is it the end of the story? No, I do not think so.

Gareth Thomas: My right hon. Friend has hit on a particular issue. I recognise that the Minister will want to press his amendments, but will he give the Committee an assurance that he will go back and look in more detail at that point and bring forward further amendments, if need be, on Report?

Nick Hurd: I am always happy to consider helpful suggestions from all parts of the Committee. The important point, which comes back to my opening remarks, is that there is a duty on us as legislators to ensure that whatever we put on the statute book is as clear and as easy to implement as possible for commissioners, who are doing an incredibly difficult job. I take on board the right hon. Lady’s point, although I do not think that it will move the Government’s position substantively on our desire to limit the scope of the Bill to include public services only, because that is where there is the most scope and the greatest direct impact on individuals.
The focus on the pre-procurement stage will mean that resulting contracts are awarded on the basis of a more thorough understanding of needs and on intelligently designed specifications that aim to maximise the value of what they achieve. The amendment is in keeping with announcements made by the Prime Minister and Cabinet Office Ministers about simplifying the procurement process and driving the use of more outcome-based specifications. The amendment also clarifies that the Bill applies to setting up the framework agreement but not to individual call-offs, because call-offs must be let in accordance with the terms of the framework agreement.
Amendments 4 to 17 clarify how the duty will work in practice. Amendment 4 provides that commissioners should consider not only improving the economic, environmental and social well-being of the service procured but how the procurement process itself may be improved. For example, pre-procurement consultation may clarify social or environmental aspects of the service that can then be reflected in the specification. I am sure Members would agree that effective consultation can lead to less bureaucratic procurement processes, which in turn will lead to responses from a greater range of suppliers and so drive value for money.
Amendment 8, which is another technical amendment, includes a provision for urgent need. It recognises that the duties in the Bill should not impede commissioning in urgent circumstances. However, proposed subsection (4B) in clause 3 will ensure that short time scales or delays caused by the contracting authority do not count towards urgent need, which means that foreseeable delays are not covered.
Amendment 12 clarifies the application of the Bill in relation to Wales.
 Jonathan Edwards (Carmarthen East and Dinefwr) (PC) rose—

Nick Hurd: I will give way to the hon. Gentleman if he is happy to let me finish my remarks first.
After much—I stress, much—discussion with the Welsh Assembly Government, it was agreed that the Bill will apply only to the non-devolved functions exercised by Welsh contracting authorities. Amendment 12 clarifies that authorities in Wales that exercise wholly or mainly devolved functions are excluded from the Bill. That more pragmatic approach for Welsh authorities will ensure that individual commissioning authorities do not have to consider, case by case, whether the Bill applies to them.

Jonathan Edwards: We welcome amendment 12 because it clarifies the original provisions in the Bill. Given the exemptions that the Minister has outlined, what sort of organisations in Wales will be affected by the Bill? If functions are devolved, what will happen and will there be a handover process?

Nick Hurd: The fundamental point is that Welsh bodies can basically ignore the Bill. We have had long discussions with the Welsh authorities, and we have reached a decent position. I am happy to write to the hon. Gentleman with a fuller explanation, but we have got to a sensible place with the Welsh Assembly.
The other amendments are mainly technical. Amendments 19 and 20, which provide technical points of clarification, are necessary to ensure that the commencement of the Bill gives authorities an appropriate lead-in time to implement its provisions.
The new clause, which is also a technical clarification, will ensure that, in the unlikely event of there being any overlap with the Local Government Act 1988, the Bill will take precedence. That would happen if, for instance, under the 1988 Act, local authorities were precluded from considering non-commercial aspects, such as the provision of training in a service contract. In such a case of conflict, the Bill will take precedence over such restrictions to ensure that, as intended, local authorities can consider the full economic, social and environmental value.
Amendment 22 is another technical clarification to ensure that the long title is in line with the amended content of the Bill.

Gareth Thomas: I rise not to oppose the amendments, but to reflect on the debate. I urge the Minister to reconsider the deletion of goods, and I say gently to him that he has not defined for the Committee how he arrived at the balance in his mind on that issue. Perhaps he will provide more clarity on the Government’s thought process by letter if he does not want to do so in his response. The last thing that Opposition Members—and Government Members, too, I suspect—want to see is confusion. That would lead to bureaucratic delays, and legal bills would be incurred by social enterprises and, in these financial times, by public procurement authorities, too. More clarity would be helpful.

Nick Hurd: This intervention is designed to be helpful. It is important to clarify how the Bill interacts with the best value duty placed on local authorities by the Secretary of State for Communities and Local Government, which relates to an earlier intervention. That duty, as the hon. Gentleman well knows, requires local authorities to consider value, including social value, on all contracts, services, goods and works throughout the procurement process on contracts of any value.
The Bill places a duty on all commissioners in all contracting authorities to consider how to improve social, economic and environmental well-being in services-only contracts that are at the pre-procurement stage, with contract values only above the EU procurement threshold. I want to help by placing on record how the Bill sits with the very important best value guidance delivered to local authorities by the Secretary of State.

Gareth Thomas: I am grateful for the Minister’s intervention. As I have said, we will reflect on the comments that he has made, and I hope that he will continue to consider the concerns of my right hon. Friend the Member for Salford and Eccles and her neighbour, my hon. Friend the Member for Stretford and Urmston.
Will the Minister clarify how the changes to clause 3 might resolve some of the difficulties that have been thrown up by the Work programme’s procurement process? He will know about the concerns that the National Council for Voluntary Organisations has articulated, having had a considerable consultation process with a series of civil society organisations that wanted to get involved in the Work programme. People feel that the prime—framework—contract has, with one or two exceptions, gone to private sector rather than civil society organisations. The key concern is that the size, complexity and model of financing have excluded many CSOs from bidding.
The NCVO made a striking comment about a further barrier. Some of the subcontractors are prevented from entering the Work programme because of the overly bureaucratic processes adopted by primes—private sector organisations, in the main—which cannot be good. One assumes that such organisations had not intended for that to be the situation. When CSOs have had to fill in documentation of more than 140 pages, in some cases, and still have not gained any contracts as a result, one wonders whether the Work programme needs substantial reform. If the Minister thinks that the clause will have no impact on improving the Work programme, can he tell the Committee what will do so? Such improvement is needed so that CSOs can have a strong role in that process, as was the Government’s intent.

James Gray: Order. Before I call the next speaker, it might be helpful if I tell hon. Members that I hope to complete the Committee’s business by 11.25 am. I have discretion to extend that if necessary, after which, if business is still not completed, we will have to adjourn and reconvene on another day, which the Committee might not be enthusiastic about.

Hazel Blears: I think that we are all keen to make progress with the Bill and get on with it.
I have a few questions for the Minister. The area of procurement has been fraught with difficulty and confusion. Many very good local authorities have faced legal challenge from a range of competing contractors because they have not had full confidence in the procurement process. I want to ensure that the Minister’s amendments send out a clear message to local government that they are entitled to take into account issues other than the lowest price and that they can look at social, economic and environmental well-being, as the Bill intends.
Many of us will know that the European rules have often been cited as the reason why it is not possible to take into account anything other than the lowest tender. Yet other European countries, as I am afraid is often the case with regulations, have not felt as constrained by such regulations and have therefore awarded contracts to local suppliers and companies, and have been able to get the benefit of massive procurement, whereas in this country, because we always play by the rules—or what we think are the rules—we have often missed out on getting that local supply chain, and local labour and investment, which can really help our local economies to thrive.
I want the Minister’s robust reassurance that if local authorities go down the route of prioritising within their framework agreements and contracting process the companies that provide social value—as in the example I cited earlier, taking on unemployed people, giving them a chance to work, getting them in a position where they are paying taxes and national insurance rather than receiving unemployment benefit—that could be a legitimate consideration in awarding contracts for goods and services. Unless there is a positive, robust message that goes out, we will end up being back where we started, with local authorities feeling afraid to use the muscle of their procurement process to get the transformational effect that the hon. Member for Warwick and Leamington wants. I would welcome the Minister’s confirmation that it is legitimate to prioritise organisations that can evidence social, economic and environmental well-being.
The Bill states that the factors taken into account by local authorities must be relevant and proportionate to the goods and services being procured. Perhaps the Minister could give, on the record, examples of the kind of things that can be taken into account—not and exhaustive and exclusive list—because it would be helpful to people reading the transcript of proceedings to know the strength of the Government’s intent and that we are not fiddling round the edges and tweaking a little bit of regulation, but are genuinely embarked on a transformational effect in the procurement process.
I also want to ask how we evidence the social value that we are trying to procure. Like social enterprise, it is an evolving field and there are many different ways of measuring social value. There is social return on investment, which is a transactional, numerical way of measuring and does not necessarily get to the heart of real change. There is an organisation in Manchester—also working in Salford—called Connectives, in which two young women accountants who have specialised in social accounting are now beginning to evaluate the accounts of social enterprises. It is an in-depth assessment process and one of the best I have seen. It actually gets under the skin of what social value really is.
The idea of simply having a numerical analysis will not achieve what the Minister wants to achieve, which is a much more textural analysis of the impact on jobs, but also of the well-being element of the Bill. It can be a nebulous concept, and there is a lot of work to be done on what tools we are going to give local authorities to help them with intelligent commissioning. Some authorities are well developed. We have the co-op councils and Councillor Steve Reed in Lambeth and all his colleagues in Rochdale. There are 50 authorities now in the co-operative network that are exploring this. Manchester City council has recently recommissioned the whole of its youth service—very intelligent commissioning—from the bottom up. At Salford council, we have a range of social enterprises in the health and employment sector. Some councils are really good, but the Minister must acknowledge that some councils will be starting from scratch. They need to be given real tools— not meaningless strategies—to be able to do the job, and sufficient reassurance that they will not be exposed to a legal claim from an unsuccessful bidder because they have taken into account things other than price, quality, time and the bottom line. The Minister owes it to us to put some flesh on the bones in this debate so that it is not a purely transactional process but people understand the commitment that is behind it.
I echo the point that my hon. Friend the Member for Harrow West has made that we are talking about local authorities, because Government and other quasi-public organisations carry out a huge amount of public procurement. In my constituency, for example, the BBC’s MediaCityUK has done a fabulous job of getting local labour. It has worked tremendously hard with the local authority and local companies, and twice as much local labour as we had for the Olympics has been involved in building MediaCityUK, which has had a tremendous effect on our local economy. That BBC money is public money, but unfortunately it will not be covered under the terms of the Bill. We are missing out by constraining ourselves so much when we could have had more of an impact.
The Work programme is a huge problem. In Greater Manchester the three big Work programme contracts have gone to organisations in Newcastle, Leeds and Birmingham, and the small organisations, which I strongly hoped would be involved, have been squeezed out of the process. They say that by the time the money comes out of the main contractors there is nothing left to trickle down to small social enterprises, which are often best placed to get people into work. Such enterprises will send people to go and knock on doors on the estate; they are not big private sector organisations.
There is a danger that the principle to which we are all signed up, which we are passionate about, will be undermined unless there is a sufficient push. I recognise the Minister’s difficulties across Government, with the practicalities and with the economic situation, but if the Government are committed to their coalition statement that they want to develop this sector they will have to be more robust in giving a lead to public sector organisations. Such organisations look to Government for a lead and for legislation that drives transformational change.
I would welcome the Minister’s confirmation on the points that I have raised. I would also welcome a sense that he is not simply fighting a lone battle in the Cabinet Office. The proposal does not have a strategy and it does not have any levers across Government; where will the Minister get the power, which will be shared by all his Whitehall partners, to make this happen?

Nick Hurd: There has been a lot of discussion about the Work programme, and I am not sure that this is the most appropriate place for an extensive debate on it. It is a large piece of contracting, however, and in many ways it tests some of the values and principles that we are debating. Our aims through the Work programme are entirely consistent with what the previous Administration were trying to achieve. The scheme is ambitious; it is the largest contracting on a payment-by-results basis anywhere. It involves contracting at scale, but there is an explicit desire to engage smaller providers and the not-for-profit sector in that process. It is the start of the journey.
Personally, I was delighted to see two prime contractors from the sector, and I would be more than happy to see at least 300 organisations in the supply chain. Not everyone can be winners in that process, and many organisations in my constituency are frustrated. That’s life, but the Government have made a commitment to ensure that the prime contractors in that process do not, in the words of the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling), “duff up” their supply chain. My right hon. Friend has said clearly that he is prepared to re-examine contracts where there is hard evidence of that happening. I am working closely with him to examine the evidence on the ground and working closely with strategic partners to mine that evidence to find out what is happening as people start to flow through the system. It is a little premature to make judgments on that but the Government are examining it extremely carefully, not least in the light of the commitments that they have made.
The Merlin standard was negotiated as a framework for handling relationships in such contracts, and the Government are working hard through the formation of Big Society Capital to create an environment with a growing market for social methods to make it easier for social enterprises and charities to access the working capital that they will need to compete effectively for long-term payment-by-results contracts. The Work programme is work in progress and it is too early to say conclusively that there is a major problem with it, but the Government are monitoring it extremely carefully.

Gareth Thomas: Will the Minister give way?

Nick Hurd: With respect, and in light of the strictures of the Chair, I prefer to move on from the Work programme.

James Gray: Order. The Minister is ranging fairly wide and might want to focus on the amendment under discussion.

Nick Hurd: I have a lot of sympathy with the comments of the right hon. Member for Salford and Eccles. The Bill and the best value duty, the importance of which the Committee has underestimated, together send a strong signal to local commissioners about the Government’s desire to encourage consideration of wider social, economic and environment well-being when contracting. In my earlier intervention, I tried to make it clear how the best value duty and the Bill fit together to send an extremely strong signal to contracting authorities, in a way that is entirely consistent with EU procurement law. The right hon. Lady made an important point, however, about the need to support commissioners in that process—they are human beings doing an extremely difficult job in an atmosphere of a tremendous amount of change and fewer resources. She has surely spoken, as I have done, to many commissioners who are trying to do the right thing and to be imaginative leaders, and when one listens to them one realises how difficult their world is.

Gareth Thomas: That is why a strategy is needed.

Nick Hurd: The shadow Minister says that that is why we need a strategy but, again, that might reflect the Labour approach to life: some document issued from central Government can, somehow, suddenly transform a situation. We are talking about a culture change, and about making people comfortable with doing things in a different way. The thought that some strategy document from central Government will change that is, frankly, for the birds. The reason why such interventions have not worked before is precisely the point made by the right hon. Lady: what is the actual human support given to commissioners who want to do things in different ways? It is not enough to write White Papers or even legislation and think, “That’s sorted”, because it is not. That was the mistake made in the past.
We are therefore looking actively at a number of issues, such as social value. Again, that is one of those phrases, but what does it mean? We are doing a lot of work with partners in the sector and having a discussion in a granular, sub-sector way on action and to ask what we mean by “social value” in the scheme. What should we be measuring? How do we make it as easy as possible to measure? How do we achieve the relevant consensus among commissioner, providers of money and the suppliers of services, so that we make it as easy as possible? What can we do to send clearer information to commissioners and to those providing services about what is possible within the law? The right hon. Lady mentioned European procurement law, which is often used as a smoke screen, and we need to puncture a few myths on that and to make it clearer about what is possible and what is not.
I talked earlier about the need to find the leadership and the best practice and to spread it. That will be at the heart of what we are doing in our new commissioner support programme, on which we are consulting. We have some resources to invest in the area because it is absolutely necessary to support those human beings and to provide them with the inspiration and information that they need.
Sitting behind all that is something that has not been mentioned at all but is to do with the signals to commissioners about the sincerity of the Government’s determination in the area: in the Localism Bill is the right to challenge, which is being defined now through a process of consulting on the regulations. The creation of a new right for local communities, social enterprises or voluntary groups to challenge existing provision, armed with much more information in a new area of transparency about what is being done in their name, is a powerful challenge to the status quo. It is radical—if we get it right.
I sincerely believe that through a combination of the legislation, the best value duty, the right to challenge and all our work to support at a human level the people who we want to be a little bolder and braver in doing new things, we are sending a strong signal to the system that we want change and transformation. We should not underestimate the culture change that we are talking about, nor imagine that some sort of strategy document will change it. We are on a journey, and it will take some time. On that basis, I close my remarks and recommend the amendments.

Amendment 3 agreed to.

Amendments made: 4, in clause 3, page 2, line 34, leave out from ‘consider’ to end of line 36 and insert ‘—
(a) how what is proposed to be procured might improve the economic, social and environmental well-being of the relevant area, and
(b) how, in conducting the process of procurement, it might act with a view to securing that improvement.’.
Amendment 5, in clause 3, page 2, line 36, at end insert—
‘(2A) In subsection (2) “the relevant area” means the area consisting of the area or areas of the one or more relevant authorities on whose behalf a public services contract is, or contracts based on a framework agreement are, intended to be made.
(2B) For the purposes of subsection (2A) the area of a relevant authority is an area consisting of the area or areas by reference to which the authority primarily exercises its functions, disregarding any areas outside the United Kingdom.’.
Amendment 6, in clause 3, page 2, line 37, leave out from ‘subsection’ to ‘must’ in line 38 and insert
‘(2)(b) only matters that are relevant to what is proposed to be procured and, in doing so,’.
Amendment 7, in clause 3, page 2, line 41, leave out from ‘to’ to end of line 42 and insert
‘undertake any consultation as to the matters that fall to be considered under subsection (2).’.
Amendment 8, in clause 3, page 2, line 42, at end insert—
‘(4A) If an urgent need to arrange the procurement in question makes it impractical to comply with the requirements in subsections (2), (3) and (4) before the time indicated by subsection (1), a relevant authority may disregard the requirements to the extent that it is not practical to comply with them.
(4B) Subsection (4A) does not apply to the extent that the time available is reduced by undue delay on the part of the authority after this section has come into force.’.
Amendment 9, in clause 3, page 2, line 42,at end insert—
‘( ) Failure to comply with subsection (1), (2), (3) or (4) does not affect the validity of anything done in order to comply with the Regulations.’.
Amendment 10, in clause 3, page 2, line 43, leave out subsections (5) and (6).
Amendment 11, in clause 3, page 3, line 6, leave out subsection (7).
Amendment 12, in clause 3, page 3, line 10, leave out subsections (8) to (10) and insert—
‘(8A) The following are not required to comply with subsections (1), (2), (3) and (4)—
(a) the Welsh Ministers;
(b) the First Minister for Wales;
(c) the Counsel General to the Welsh Assembly Government;
(d) the National Assembly for Wales Commission;
(e) a relevant authority whose functions are wholly or mainly Welsh devolved functions.
(8B) For the purposes of subsection (8A) a function of a relevant authority is a Welsh devolved function if—
(a) provision conferring or imposing that function upon the authority is within the legislative competence of the National Assembly for Wales, or
(b) provision conferring or imposing that function upon the authority is made by the Welsh Ministers.’.
Amendment 13, in clause 3, page 3, line 32, at end insert—
‘( ) This section has effect in relation to a relevant authority’s proposed procurement or arrangements for procurement only if the public services contract or framework agreement in contemplation is such that the Regulations would have effect in relation to it.’.
Amendment 14, in clause 3, page 3, line 32, at end insert—
‘( ) If anything done before the commencement of this section would to any extent have satisfied the requirements in subsections (1), (2), (3) and (4) if done after that commencement, the requirements are to that extent to be treated as satisfied.’.
Amendment 15, in clause 3, page 3, line 33, at end insert—
‘“framework agreement” has the same meaning as in the Regulations, and a reference to a contract based on a framework agreement is a reference to a contract entered into on terms established by such an arrangement;
“public services contract” has the same meaning as in the Regulations (and includes a contract that is treated as being a public services contract by the Regulations);’.
Amendment 16, in clause 3, page 3, leave out lines 34 and 35.
Amendment 17, in clause 3, page 3, line 36, leave out from ‘(S.I. 2006/5)’ to end of line 38 and insert
‘, or any regulations replacing those regulations, as from time to time amended;’.—(Mr Hurd.)

Clause 3, as amended, ordered to stand part of the Bill.

Clause 4 ordered to stand part of the Bill.

Clause 5  - Short title, commencement and extent

Amendments made: 18, in clause 5, page 4, line 2, leave out ‘Social Enterprise and’.
Amendment 19, in clause 5, page 4, line 5, at end insert—
‘( ) Sections 3 and (Local authority contracts) come into force on such day as a Minister of the Crown may by order made by statutory instrument appoint.’.
Amendment 20, in clause 5, page 4, line 6, leave out subsection (3).—(Mr Hurd.)

Clause 5, as amended, ordered to stand part of the Bill.

New Clause 1  - Local authority contracts

‘In section 17 of the Local Government Act 1988 (exclusion of non-commercial considerations in the case of local and other public authority contracts), after subsection (10) insert—
“(11) This section does not prevent a public authority to which it applies from exercising any function regulated by this section with reference to a non-commercial matter to the extent that the authority considers it necessary or expedient to do so to enable or facilitate compliance with a duty imposed on it by section 3 of the Public Services (Social Value) Act 2011.”’.—(Mr Hurd.)

Brought up, read the First and Second time, and added to the Bill.

Title

Amendments made: 21, Title, line 1, leave out lines 1 to 3.
Amendment 22, Title, line 4, leave out from ‘require’ to second ‘and’ in line 5 and insert
‘public authorities to have regard to economic, social and environmental well-being in connection with public services contracts;’.—(Mr Hurd.)

Bill, as amended, to be reported.

Committee rose.